Wednesday, May 26, 2010

And the people are happy too!

[I]n the past couple of months the Chinese government has taken regulatory steps to try to cool things down including, most notably, requiring a 50% downpayment on any second homes...it’s a reminder that it’s not as if it’s impossible for regulators to notice that something funny’s happening and then change the rules in response. It’s just necessary to not have regulators possessed of an a priori belief that systemic market meltdowns are impossible.

[T]he Chinese economic miracle is really a great deal less of a “free market” miracle than the conventional understanding in the United States would suggest...the really striking facts are things like the one highlighted by Tyler Cowen that “Of the 22 Chinese corporations listed on the Fortune Global 500, 21 are controlled by China’s central government or state-run banks.” The closest analogy it seems to me is probably to France, which I think is the western country to have been least-impacted by the neoliberal turn away from state ownership of firms. And somewhat like in France, the Chinese speak specifically about the idea that over the past thirty years their development has been enhanced by the creation of a better-educated better-trained bureaucracy and their aspirations to continue doing this in the future.

By the lights of the American conventional wisdom, this whole situation seems mostly like a warning sign—beware! you’re violating the terms of The Washington Consensus!—but nobody can doubt that they’ve had a great run for the past 20 years. What’s more, though the prevailing policy consensus in the United States would lead you to believe that a country with France’s policies would necessarily be a basketcase, France is itself a very successful and prosperous nation and society.

It’s impossible to come to China and not be struck by the rapid pace at which infrastructure is advancing. Shanghai is criss-crossed by a series of new looking elevated highways that the city will almost certainly regret in 20 years, as well as by an impressively large Metro system that, as illustrated below, has grown at a pace that’s completely inconceivable for an American city...

The United States simply doesn’t try to invest on this scale. But that’s not because we don’t have the resources to do it. Our overall spending on the military in dollar terms is higher than what China spends on infrastructure, and it’s much higher on a per capita basis. And what we spend on health care for old people dwarfs anything China does in that regard. We, in other words, are perfectly capable of mobilizing major public resources for major public purposes, we just choose to do it for different things.

China clearly features a great deal of politics happening and a meaningful public sphere exists in which controversies play out and the authorities are responsive to it. This is part of what makes the system work but it also really undercuts the main arguments you hear about why democracy wouldn’t or couldn’t work.

This represents a very efficient use of the land in China, with the country reaping the world’s largest agricultural output out of less arable land than we have in the United States. But as you can see, it’s a very inefficient deployment of people relative to what you see in the other sectors.

So insofar as global demand for Chinese industrial products continues to grow, the Chinese economy will be able to maintain substantial growth simply by shifting people off farms and into factories even without moving up the value chain.

These kinds of issues are leading Chinese authorities to get more serious about tackling pollution. Environmental laws have been on the books for years, but according to businesspeople here real action is something that’s only come in the past 18-24 months.

Now, these posts are not the starry-eyed glowing reports that one would expect of a self-hating American being Potemkined by an authoritarian empire. But, laconic and qualified as they are, there is no mistaking the one-sidedness of Yglesias' view of China as a country that can do everything we can't.

There is no mention of, say, the fact that China's housing market interventions have failed to stop prices from skyrocketing. Or that their "get-tough" environmental policies, supposedly now with local leaders on board, have failed to stop the steady increase in particulate matter in China's air. Or that the people who get the Chinese government to actualy respond to their wishes are fewer in number than the hundreds of millions who get ignored and cheated. When making the infrastructure comparison, he only briefly mentions (and then dismisses) the fact that we already have much more existing infrastructure than China, or the fact that Japan's massive infrastructure boom in the 90s was mostly a waste of money (note: I support strong increases in U.S. infrastructure spending, but not to China levels!). And his optimism that China will eventually see the need to pull its weight on global problems seems as misplaced as his optimism that China would revaluate its currency in response to our entreaties (I remember confident predictions on Yglesias' part that RMB revaluation was just around the corner, followed by deafening silence when nothing happened).

Why does Yglesias give China so much love, especially when he compares it with America? After all, it seems like there's a lot for him to dislike. China's repression (look at how Yglesias has reviled Bush's erosion of civil liberties, and that's nothing compared to China!). Its staggering inequality, the way its currency policy generates inequality in the U.S. Its cynical embrace of capitalism spiked with a hefty dose of government corruption. The fact that all those green policies are a mild and very recent response to decades of growth-at-any-cost.

I don't know the answer to this, but I have several guesses.

One guess is that Yglesias is using praise of China to indirectly express his frustration with the very real political paralysis here in the United States. This is part of a time-honored tradition of liberals shaming their country into action by saying "Hey, look how good they have it over there!"

A second reason might be that Yglesias wants to minimize U.S.-China rivalry. He may believe, as Brad DeLong used to often say, that the U.S. future hinges entirely on how well we convince China that we are their friend (a kind of updated version of "better red than dead"). Or he might think that U.S.-China rivalry is just a big excuse for us to divert spending from domestic uses to military ones; hence, he might be using China praise to score points over U.S. conservatives.

Or it might simply be that Yglesias, like Tom Friedman (whose sweeping, uninformed, "of-course-it's-so-simple" theories Yglesias' posts have come to resemble more and more), is dazzled by displays of massive investment and rapid growth - he is impressed by The Future, and spins a thousand armchair theories based on his awe. The U.S. needs to change course. We need to do everything different. We need to emulate our rival and respect our rival. Everybody drop everything and prepare for the Age of Decline.

Which is probably all to the good. The U.S. as a whole has a tendency to overly freak out about potential rivals who seem to Have It All Figured Out (did anyone really think the Soviet economy could outperform ours, or that Japan could take all our jerbs?), but this tendency probably adds to our biggest advantage, which is adaptability. And liberal over-praise of other countries is probably good in the long run, since it compels us to add a little bit of every world system to our institutional mix.

But given how odious a regime still rules China, and given China's continued and even increasing bad behavior on the world stage, it's a little annoying to see our best journalists with their lips firmly affixed to that nation's rear end.

Update: The China love gets even more over-the-top, as Yglesias declares that China's staggering inequality is actually more equal than Sweden, and that China's housing bubbleboom is really great for poor people, who get two houses for every one they get kicked out of! I am almost willing to take back my statement that Yglesias hasn't been fully Potemkined...this is just getting ludicrous. As if most or even a substantial fraction of dispossessed Chinese homeowners get compensated. As if the threshold for "super-rich" in a country with hundreds of millions of subsistence farmers isn't substantially lower than in Sweden. Sigh.